Chapter 1: Guiding Questions §

Class: IS302 Created Time: October 21, 2020 9:59 AM Database: Assignment Database Last Edited Time: June 16, 2021 10:26 AM Status: Done

I. Discussion Questions §

1. What is IPE?

   IPE is the study of how the battle of the winners and losers in global economic exchange impacts the decisions that societies make about how to allocate the resources they have available to them.

2. Why is IPE important to learn for IR/IS students?

   IPE is important to learn because political decisions will impact economic policies also.

II. Comprehension Questions §

1. What is IPE?

   In Global economic exchange there are winners and losers. They have political battles that shapes the economic policies that government adopts.

2. Global economy can be broken down into what four areas?

   • The international trade system
   • The international monetary system
   • Multinational corporations (or MNCs)
   • Economic development.

3. What do scholars who studies these four areas focus on?

   • The International Trade System: The WTO allows most states to have equal trade with one another, while other states form regional trade agreements which creates winners and losers. The political battle between the winners and losers in this economic exchange shapes the operation of the WTO-centered system and the new regional trading framework.
   • The International Monetary System: helps peoples and countries exchange with each other using differing currencies. Battle between winners and losers in adjusting their currency price can shape the operation of this system.
   • MNCs: can be managed across borders. A decision in one country have effects on another. The winners and losers of MNCs will shape governments decisions on attracting and regulating MNCs.
   • Economic Development: why certain countries develop faster or better than others, the methods they use and their effectiveness.

4. Two abstract and broad questions typically shape IPE. What are they?

   • How exactly does politics shape the decisions that societies make about how to use the resources that are available to them?
   • What are the consequences of these decisions?

5. What are the two research traditions within IPE? Explain each one.

   • Explanatory Studies: to answer why governments make certain economic policy choices and less concerned over the welfare consequences of those decisions.
   • Evaluative Studies: to look at the consequence of the policy towards societal welfare. If it has a negative effect, they look for alternatives

6. There are three traditional schools of IPE. What are they?

   • Mercantilism: that the relationship between economic activity and state power is closely related.
   • Liberalism: that the relationship between economic activity and state power should be completely separated.
   • Marxism: the class especially the elite or capitalist class is the one who

7. What are the three central propositions of mercantilism?

   • National power and wealth is tightly connected
   • Trade provides one way of gaining wealth from abroad
   • Some type of economic activity are more valuable than others

8. What are the three propositions of ‘modern’ mercantilism?

9. Economic strength is a critical component of national power.

10. Trade is to be valued for exports, but governments should discourage imports whenever possible.

11. Some forms of economic activity are more valuable than others.

12. Contrast liberalism from mercantilism.

• Mercantilism says politics and economics is closely related, while Liberalism draws a line between the two. Economic activity is supposed to enrich people not empower states.
• Mercantilism says trade can only be good if you have trade surplus (import > export), but Liberalism says trade is beneficial no matter the balance of trade.
• Mercantilism says producing manufactured goods is better than primary goods, but Liberalism says you should produce what your country can do cheaply while trading for goods that is costly to do in your country.

10. What are the role of state according to liberals?

• The state must establish clear rights concerning ownership of property and resources.
• The judicial system must enforce these rights and the contracts that transfer ownership from one individual to another.
• Only Step in to resolve Market Failures

11. What is the Marx’s central argument? What are the three dynamics of capitalism leading to revolution as predicted by Marx?

Marxism criticize capitalism as wages aren’t paid fairly and capitalists gain the most. The inequality between the rich elites and the poor workers will worsen in capitalism. This will eventually lead to a revolution away from capitalism.

The three dynamics of capitalism are

1. Competition leads to concentration of capital resources to a small group of elite capitalists for better efficiency and capital stock

2. More investment at a certain point will return less profit, leads to reduced wages.

3. Capitalists focus on ability to produce goods while wages fall. Citizens will not be able to buy the products

4. Contrast Marxism from liberalism and mercantilism over resource allocation?

Marxists focus on large corporations as the key actor determining how resources are used.

Liberals focus on the market, saying that supply and demand will allocate resources properly

Mercantilists focus on states being the actor who allocate resources.

13. How does each traditional school of IPE address the question about the consequence of resource allocation?

• Marxists believe politics is run by elite capitalists who support large enterprises in making decisions in the economy
• Liberal think politics does not have effect on the economy only transactions between individuals
• In the goal of gaining national power, Mercantilists allocate their resources accordingly.

14. Differentiate the three images of central dynamic of IPE viewed by the three traditional schools?

• Mercantilists: states will conflict to compete and to attract and maintain desired industries
• Liberalists: IPE is harmonious because everyone benefit from trade, power has little effect, and international economic conflicts are rare